Petr is a citizen of the Slovak Republic, where the domestic currency is the euro. He is going on a trip to London and needs to exchange money for this trip. During the summer break, he saved $130\,\text{EUR}$ (in cash) and wants to exchange it for pounds at his bank. He has found an exchange rates table from his bank (see the table below) and wants to find out how much money he will get.
His bank’s exchange rates table:
Amounts are stated for $1\,\text{GBP}$. Valid as of 25.08.2023.
$$\begin{array}{|c|c|c|c|c|c|}\hline \small\text{Currency} &\small\text{Currency Name} & \small\text{Foreign Currency} & \small\text{Foreign Currency} & \small\text{Foreign Exchange} & \small\text{Foreign Exchange}\cr & & \small\text{(FC)} & \small\text{(FC)} & \small\text{(FX)} & \small\text{(FX)}\cr & & \small\text{“we buy“} & \small\text{“we sell“} & \small\text{“we buy“} & \small\text{“we sell“}\cr \hline \small\text{GBP} & \small\text{Pound Sterling (£)} & 0.8740 & 0.8398 & 0.8890 & 0.8333\cr\hline \end{array}$$
Peter asked his four classmates, Zuzana, Martin, Katka, and Jan, for help. Each of them used a different exchange rate to solve the problem.
Zuzana used the exchange rate FC “we buy“ because Peter buys pounds in cash. She found that Peter, at the bank, gets: $$130\,\text{EUR}\cdot0.8740\,\frac{\text{GBP}}{\text{EUR}}\doteq113.6\,\text{GBP}$$ Martin used the exchange rate FC “we sell“ because a bank is selling pounds to Peter in cash. He found that Peter, at the bank, gets: $$130\,\text{EUR}\cdot0.8398\,\frac{\text{GBP}}{\text{EUR}}\doteq109.2\,\text{GBP}$$ Katka used the exchange rate FX “we buy“ because Peter buys pounds in cash. She found that Peter, at the bank, gets: $$130\,\text{EUR}\cdot0.8890\,\frac{\text{GBP} }{\text{EUR}}\doteq115.6\,\text{GBP}$$ Jan used the exchange rate FX “we sell“ because a bank is selling pounds to Peter in cash. He found that Peter, at the bank, gets: $$130\,\text{EUR}\cdot0.8333\,\frac{\text{GBP}}{\text{EUR}}\doteq108.3\,\text{GBP}$$ Who got the correct result?
Katka
Martin
Zuzana
Jan
The term Foreign Currency (FC) refers to non-cash form (e.g., in an account).
The term Foreign Exchange (FX) refers to cash form (banknotes and coins).
FC „we buy'' - If a bank is buying foreign currency from you, in the form of non-cash electronic funds in a foreign currency and paying you in your domestic currency.
FC „we sell" - If a bank is selling foreign currency to you, particularly in the form of non-cash electronic funds in a foreign currency.
FX „we buy" - The exchange rate for the purchase of currency is used when a bank is buying foreign currency from you, and they pay you in your domestic currency.
FX „we sell" - The exchange rate for the sale of currency is used when a bank is selling foreign currency to you, and you pay in your domestic currency.